Which statement(s) is/are TRUE? I. Increasing the reserve requirement would decrease the money supply.
II) Decreasing the discount rate would decrease the money supply.
III) Buying government bonds would increase the money supply.
A) II only
B) III only
C) I and II only
D) I and III only

Question

Quizplus · Accepted Answer

I is true because when the reserve requirement increases, banks are required to keep more money in reserves and therefore have less money to lend out, leading to a decrease in the money supply. 
III is true because when the Fed buys government bonds, it injects cash into the economy, increasing the money supply. 
II is false because decreasing the discount rate would encourage banks to borrow more from the Fed, increasing the money supply.

Which Statement(s) Is/are TRUE? I